Headline; CFPB Issues Rule To Shield Class Actions Against Banks

midsection of male judge striking gavel while holding scale with money in courtroom

To Arbitrate Or Not To Arbitrate, That Is The Question

The Consumer Financial Protection Bureau has issued a new rule that would ensure consumers to bring class-action lawsuits against banks instead of being forced into private arbitration.

This rule has been years in the making.

It would not ban all arbitrations just those that block groups from bringing a class-action lawsuit.

We sign these agreements all the time on credit card applications and doctor’s rules.

In California, There Is A Section On The Real Estate Purchase Agreement About This Topic

On the RPA, buyers and seller can agree to arbitration or agree to no arbitration.

Their choice.


Similarly, Arbitration Can Be Found At The Doctor’s Office

Many times lately, I have noted that when I go to a Doctor for the first time or after a long respite from treatments, they give me the doctor’s choice of an arbitration agreement.

There is no discussion.

The script for all receptionists in doctor’s or other similar offices is, “Insurance cards and photo idea please, please fill out these papers and sign them, fill out this agreement.  Also how will you pay any co-pays.”

The other day, the wait time was a little long, so I read this agreement. Talk about a one-sided agreement.

“You cannot file a class-action lawsuit, you cannot ever say bad things about this doctor, you agree to use the arbitrator selected by the doctor’s legal staff, you agree to pay your portion of those fees, you cannot file a complaint against any arbitration decision, you must start any action within certain time frames, you can never leave a waiting room no matter how long you have waited because the doctor was in surgery or you will be charged for a visit, and you can never park in the doctor’s parking space.”

The CFPB Is Permitted To Create This Rule Too

This is because of authority granted by the Dodd-Frank Act.

It states,

“The CFPB may prohibit or impose conditions or limitations on the use of arbitration clauses if it determines that restricting such provision is in the public interest and for the protection of consumers.”

Richard Cordray decided that this was the case in the use of the agreements in bank accounts and credit cards.

Now the rub. They have the authority at this time to do this, but Congress has the authority to overturn the decision.

It is a very sure bet that this will happen.

The Vehicle Is The Congressional Review Act

They must act within 60 days, but that will happen.

Footnote: Wells Fargo is back in the spotlight again. They are being accused of charging borrowers delayed rate-lock fees.

2 Responses to Headline; CFPB Issues Rule To Shield Class Actions Against Banks

  1. Rii July 15, 2017 at 11:01 am #

    The exception to following the agreement to arbitrate is to allege a reasonable premise of fraud.

    • Duane Gomer July 18, 2017 at 2:58 pm #

      So many disclosures that nobody reads. I believe that CAR’s legal staff feel that they have to keep writing new forms to justify their existence. When I first went into RE, the purchase agreement was one page and a large portion of that was blank. Some brokers lamented that shortly before this, the agreement was on a post card size form.

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